NEW YORK (8/26/14)--Just as with finding unconventional uses for common items--did you know crushed aspirin is great at removing sweat stains?--there are multiple ways to use your tax-advantaged accounts.
A report released this month from the Employee Benefit Research Institute, Washington D.C., found that the average person contributing the maximum allowed to a health savings account (HSA) could save up $360,000 in 40 years assuming a 2.5% rate of return. That amount jumps to $600,000 after 40 years at a 5% rate of return (The New York Times Aug. 19).
HSAs were created a decade ago to help people with high-deductible insurance plans pay for health-care expenses. The reason financial planners are beginning to recommend them as a potential vehicle for retirement savings is that they're triple tax-advantaged: contributions reduce your taxable income, grow tax free, and can be withdrawn tax-free for eligible expenses.
And although the max you can contribute annually to an HSA now is $3,300 for an individual and $6,550 for a family, the balance can be rolled over from year to year and invested.
You can only contribute to an HSA if you're enrolled in a high-deductible health insurance plan, and it only makes sense to use it as a long-term investment if you have enough money to cover your out-of-pocket healthcare expenses.
Here are some other outside-the-box uses for conventional tax-advantaged accounts (Forbes Aug. 14):
For related information, read "Interest Deferred: Beware Zero-Percent Medical Credit Cards" and "Self-Directed IRAs: With Flexibility Comes Risk" in the Home & Family Finance Resource Center.